September 18, 2008

Future’s Not Sunny for Our Travel Firms

The cost of a break in the sun is set to rise as the holiday sector struggles against high fuel costs and weak consumer confidence.

Travel agents in Stoke-on-Trent have already seen a rise in the cost of holidays after tour company XL called in administrators on Friday, leaving thousands of tourists stranded.

They believe the loss of the UK's third-biggest holiday firm could see prices rise because demand could exceed supply.

Paul Beech, founder of Connect Travel, in Bryan Street, Hanley, said: "Since the demise of XL the major holiday companies have put the prices up considerably.

"People who need to re-book after XL went bust are finding there has been a short term increase.

"They can claim their money back, but when they go to book another holiday it costs more.

"For instance, some clients who paid pounds369 for a trip to Tenerife over Christmas with XL are now having to pay pounds469."

XL collapsed after struggling against spiralling fuel bills, on the back of oil price hikes, and customers tightening the purse strings.

It affected 85,000 tourists and left 1,700 staff facing an uncertain future.

British Airways chief executive Willie Walsh has predicted another 30 airlines will go bust amid 'worst' trading conditions. Italian firm Alitalia is said to be teetering on the edge of collapse.

Mr Beech said Connect has actually seen a 10 per cent rise in sales this year, despite a gloomy retail sector.

He is confident demand for holidays will remain strong as people look to escape the rain in the UK. But he believes that could lead to prices being pushed up as demand rises faster than supply in the holiday market.

He said: "Thomson and Thomas Cook are going to control a massive share of the market, and Cosmos is now third.

"Competition is good for any market and with XL gone it will not be so fierce.

"I would advise people to let the dust settle for a few weeks while the market recovers."

He believes the changes could see customers flocking back to high street travel agents.

He said: "Some operators are taking advantage of the situation with XL by increasing prices in the short term.

"A lot of people that have booked direct flights on the internet have come unstuck, but those who booked through bonded travel agents are getting their funds out.

"I have had 10 additional bookings from people who booked holidays on the internet."

He said: "I don't think this is the end of cheap holidays."

According to the Civil Aviation Authority, most XL customers were covered by the Air Travel Organisers' Licensing scheme - but its bond of around pounds42 million is unlikely to be enough to repay them in full.

Around 10,000 booked a flight directly with XL Airways through the airline's website and could be relying on credit card protection to get money back.

Mike Greenacre, managing director of Burslem-based The Co- operative Travel, said the experience could encourage more customers to use reputable travel agents.

He added: "With oil unlikely to stabilise below 130 a barrel, in the long term, competition is likely to be even fiercer for airlines to fill their seats to capacity."